Houston Flip - Regular Updates from Start to Finish

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Houston Flip - Regular Updates from Start to Finish

Mark Parzych
Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes

I am closing on my 5th house, which is my 7th deal, on October 17th and my plan is to renovation and sell it. I'm buying it from another investor who started writing about it in his BP blog but I won't share those details until it's officially in my possession. 

A year ago at this time I only had 2 houses and 1 deal. I don't count my primary residence as a deal despite house hacking it. A lot has happened in a year and I've had a major setback as described below. I'm still relativity new to real estate but I have built a strong foundation thanks to BP. I've done a little of several things and I'm still I'm trying to figure out where my time should be spent to get the most out of it.

I have several reasons for writing a public diary like this. 

1. To keep me accountable because I want to be able to go back and see what went well and what didn't. I want to be able to state specific goals/desires at moments in time and see if they're met.

2. To be a learning experience for other new investors for things I do well and things I screw up.

3. To serve as a forum for advise and help if/when I'm stuck or not sure what to do.   

I've attempted one renovation before and that was a disaster. I worked with a partner 50:50 who had much more experience but multiple contractor issues, health issues to my partner, and high crime in the area lead to most of my capital being tied up for 9 months with no profit to speak of. I did learn a lot about what not to do, so maybe I'll be better off going forward. I'm definitely coming into this flip much more prepared than last time. I may post that story if I get some interest. 

This time around I'm using a local bank as my lender instead of doing all cash. They lend 80% of the (purchase price + reno cost), or 75% LTV of ARV, whichever is lower. At only 1PT, and 6% interest it's a great resource for cheap money. The downside is they need 4 weeks to close like a traditional bank so the seller needs a flexible closing date.

I'll post pictures, show the numbers, and provide much more information as things get going. I don't want to be too premature since I don't own the house yet. I'm hoping to finalize my contractor's bid proposal this weekend so we cant start on Tuesday. 

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Julie MarquezPro Member
Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
9y

@Mark Parzych Thanks for sharing your journey. My husband and I are about to close on a 2/1 house that is currently down to the studs, so it looks almost the same condition as yours! This is so much great information here. Except my numbers seem exponentially more. $250,000 purchase price and $90,000 in rehab costs. $30,000 for the plumbing and furnace alone! I'll be following along!

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  • Grace Jordan
    Brooklyn, NY · Member since 2016 · 71 posts · 21 votes
    9y

    Mark,

    What an amazingly documented journey! Clearly you have the vision, passion and motivation as in Investor. With such attention to design and detail I almost view the process as a work of art.

    Thanks for sharing the entire process with us including the highs and the lows. There will always be unscrupulous people in life. Your former contractor may feel as though he either had the right, or got the upper hand by walking away with your cash. But his limited vision and lack of integrity are things that will follow him throughout his life. He probably has never heard of Karma either.

    I admire your courage and strength to forge ahead and finish the project. With all of the challenges came one of the best educational experiences.

    I wish you continued success. Enjoy your time away in January

    0Reply
  • Holly Scott
    Divide, CO · Member since 2016 · 46 posts · 9 votes
    9y

    Thank you Mark, I am going to be looking at putting in a lot of those kinds of details into a contract today. And I'm using a hard money lender so I need to touch base about the pay out schedule. It looks like you are making good progress, I hope the rest of your project goes smoothly!

    0Reply
  • Mark Parzych
    OP
    Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
    9y

    @Grace Jordan

    Thanks for the nice words and encouragement. 

    @Holly Scott

    The contractor is probably going to feel like it's overkill but this is what I'd do.

     Ask the contractor for a detailed bid on all the discussions you've had. Let them spend the time to bring thought to paper. It does a few things. 

    1. You will see if the contractor understood the verbal scope

    2. It'll save yourself time

    3. If a newbie does it wtthout enough experience things will be missed

    4. It gives the contractor control--- at least temporarily.

    Once everything is written down, that's when you revise it and break down the detail even further. Try to not forget anything. Then once this revision is sent back,  discussed and revised again, that's when you do your final walk through using the bid estimate line by line. During this final scope there will be additional items that pop up. Get it revised and you should be pretty much all set.

    In addition have the contractor come up with a draw schedule and revise it the same way.

    Now this is what I plan to do going forward. I actually have no idea if what I'm suggesting is normal or not.  I'm a detailed guy by nature but my goal would be to systemetize once I find a dependable contractor who I can use multiple times.

    3Reply
  • Julie MarquezPro Member
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    9y

    @Mark Parzych It definitely is looking like a good quality flip property, so selling it does seem like a good idea. Especially if you can get buyers lined up already.

    Sorry about your GC issues. I like your scope of work, and you can get even more wordy to cover yourself:

    "Provide and install all necessary labor, material, and equipment for tile wall surround in bathroom that surrounds tub and extends to the ceiling." And then when they don't seal the tile and grout because it's requires a separate trip days later, you can remind them that is is necessary to complete the total tile job.

    0Reply
  • Mark Parzych
    OP
    Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
    9y

    End of Week 9. 

    This has been an up and down experience these past 9 weeks. It's coming to a close but there are still some concerns. The plumber wasn't able to do anything today because he came too late. By the time he got there tiles were already on the ground. I'm going to have my GC finish up the plumbing work for an unknown amount. I asked him to give me a fair price and I'll see what he comes up with tomorrow. I know what this plumber gave me so it's basically a test to see how cheap or expensive he is. The reason why I'm doing this is because the plumber will be out of town all next week and I can't have him holding up the renovation.

    The electric guy is so slow it's taking forever to put in light fixtures, outlets, and switches. Still going at it for the 4th night now. On top of that he's putting in the switches crooked despite many reminders to get them in better.

    All the flooring should be in completely today. Both tile and laminate. Tomorrow will be spent on finishing up quarter round and baseboards, putting in plumbing fixtures, installing appliances, and finishing up shower tile. We'll try to get the plumbing inspection Monday or Tuesday. I need to wait until the gas meter is put in before getting HVAC to finish up. I also asked the GC if he knew any landscapers to make the outside look pretty. He told me I should put up a fence to enclose the backyard. I'm 50/50 on that. I'm not sure if it would get any return and it can always be a concession if a buyer really wants one. 

    I'm targeting next Thursday until the house is complete. That may be aggressive due to inspections but at the very least it may be ready for pictures used for the listing. I need it ready to list by Jan 4th so it can be pending when I return from my business trip.

    1Reply
  • Mark Parzych
    OP
    Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
    9y

    I'll add that a lot of thought went into the design from paint color, cabinet color, fixtures, lighting, tile, back-splash, accents, crown, etc. It's definitely going to stand out as a higher end house for the area, but in reality this verses lower end finishes are not all that difference in price. The reason is because in many remodels, people keep as much as they can to save money. There's no reason to replace functional non-dated items so the difference in cost is a lot more. For example if my kitchen faucet cost $200, and a lower grade one cost $100, my difference in cost is $100. But for someone trying to keep an existing faucet, he would pay a $200 difference in cost plus demo/uninstall labor. This concept applies to everything because everything is brand new. At some point I'll itemize all my finishings and compare to lower grade to see what this spread really is. I bet the spread between rental grade and higher end in a home like this will be less than 8k. That 8k plus a lot more will definitely be made back when selling.

    0Reply
  • Julie MarquezPro Member
    Investor · Skagit County, WA · Member since 2016 · 1k+ posts · 807 votes
    9y

    @Mark Parzych I like your point about the upgrades and differences in costs, especially installing them now and now that you are going to sell your rehab.

    If you want to become a real stickler owner, you can create a punchlist of all the outstanding and deficient items (like the not straight outlets), and then go around and mark everything you see with little pieces of blue tape. This is the norm in commercial construction, not sure about residential, but worth it to get what you want.

    0Reply
  • Sid Leibowitz
    Contractor · Glen Cove, NY · Member since 2016 · 209 posts · 89 votes
    9y

    Mark. This is my type of flip. Have you done an Excel sheet line item schedule so you can keep track of the work progress timing of each phase? I usually turn a construction project like this is 90 days from cradle to grave. Time is money in the flip cycle. If inspections are to be done in progression they have to be scheduled with the town building dept in order to not hit a road block. Do you have to have inspections in phases before closing your work in that need to be scheduled or do you stop the project while you wait for the inspector to catch up? 

    0Reply
  • Mark Parzych
    OP
    Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
    9y

    @Sid Leibowitz

    I have not done a line item schedule. I can go back through my postings, pictures, and texts to do a recap of everything. All I cared in the beginning was meeting my deadline in 1st week of January. I knew it was falling behind schedule mid-way through but this new contractor put things back on track.

    All that's left for inspections is final inspection for electric, gas line test, final inspection for plumbing, and final inspection for HVAC, and a final building inspection.

    Because the gas meter is out, I need the gas line test inspection and passed to get the gas meter back. Then I'll have to call out HVAC for them to finish up part of their work and test it. Then call for HVAC inspection. Electric inspection can be called once electrician is done with everything so once he's done we'll call for that. Ideally all permits are closed before I list the house.

    My statements above are what I believe the process is. I've actually never dealt with permits before so I may be wrong.

    0Reply
  • Sid Leibowitz
    Contractor · Glen Cove, NY · Member since 2016 · 209 posts · 89 votes
    9y

    Hello Mark. Your contractor appears to be on top of things on the job site. The compliance is another issue. This does not mean that the permits and other inspection compliance issues were not addressed. In New York we have many code and compliance issues in every direction that can hold up the sale or transfer of title at closing. Do you need a certificate of occupancy there (COO) at the closing? Have you discussed these with the contractor? Like is the plumbing and electrical work being done by a licensed contractor and are they insured? We always have the inspections done while the interior is open in case there is an issue and do not have to open up again. These inspections are time sensitive. Things may be different in Texas. I hope that you do not have to open up finished walls for inspection which would be an added expense in time and labor. Just curious.

    0Reply
  • Mark Parzych
    OP
    Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
    9y

    @Sid Leibowitz

    All work plumbing, electric, HVAC work must be signed off by licensed contractors. Meaning only Masters can pull permits. Some investors my allow unlicensed workers to do the work and the Master sign off to get things done cheaper, but I wouldn't feel comfortable with that. All my subcontractors were Masters, licensed, and insured. 

    Now if you followed the thread, we already passed rough in inspections by the city. The rough in is basically doing all the work that can be done with walls opened up and the inspectors scrutinizing every detail of that. The plumbing and HVAC passed the first time but the electrical failed. Apparently an outlet receptacle had to be attached to the stud better or something. That was fixed and it passed the second time around with no issue. So once all rough-ins pass, work can then be ready to continue with insulation, drywall, and so on. Once everything is complete there has to be a final inspection to make sure it was finished off correctly. 

    My new GC is actually a Master plumber. That's why I feel safe with him taking over the plumbing portion of the job. 

    0Reply
  • Sid Leibowitz
    Contractor · Glen Cove, NY · Member since 2016 · 209 posts · 89 votes
    9y

    Great So, it appears all is on target. The last house I finished, we found out that the last owner installed a brick porch and a cement staircase to the basement from a storm hatch off the back of the house without a permit or inspections over 20 years ago. The work was done properly, just no compliance. He passed away 10 years ago and the house willed to his wife. Then another 10 years passes and she passed away where I bought the house from the estate. Then I cleaned it up and went to flip it and find compliance issues. I was lucky and found a buyer that was willing to take it with the stair and porch compliance issues. I still walked away with just under a million net on 400K out of pocket. I understand the construction issues and always still learning the compliance an code issues. 

    0Reply
  • Mark Parzych
    OP
    Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
    9y

    The house is almost complete. There are some finishing touches left that should be finished by Wednesday. I'm just about ready for city inspections. 

    I've selected my realtor and it's going to be listed at 149,900 at the very top of the market by $/sqft. I'm hoping to get into a multiple offer situation at this price. I won't list it before my business trip but I should be able to handle the misc. items remotely. I'm hoping to list it in 2nd week of January. 

    I'm going to hold off posting any pictures until my agent takes his photos. 

    I'm estimating now that my final renovation cost will be just over 65k when I had a target of 45k. I'm still anticipating over 40k net profit. 

    Once everything is done I'll break down what went wrong in terms of the budget. Some extra items I didn't budget for were landscaping and building a fence/gate. 

    4Reply
  • Gordon S.
    Real Estate Agent · Houston, TX · Member since 2015 · 55 posts · 22 votes
    9y

    Looking forward to the final pics @Mark Parzych

    0Reply
  • Jay Greene
    Phoenixville, PA · Member since 2016 · 5 posts · 2 votes
    9y

    Any updates on the project? Would love to see the finished product and HAR listing. 

    0Reply
  • Mark Parzych
    OP
    Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
    9y

    So it's been a month since my last update and honestly not much has happened. I had my business trip and everything stopped. At this stage electrical inspection has passed. I'm waiting on the plumber to finish up some stuff before he can call for a plumbing inspection.  The plumber has been very hard to get a hold of and will repeatedly say he's coming and then not show up. Then also I need HVAC to be complete which isn't a concern for me. The buyer I mentioned in a previous post is still interested in buying it, but there these extended delays are very frustrating.  I'll send pictures when it's complete. Hopefully soon.

    0Reply
  • Mark Parzych
    OP
    Wholesaler · Houston, TX · Member since 2014 · 73 posts · 57 votes
    9y

    I feel bad about not updated my progress. I was embarrassed about not meeting expectations.

    The house is currently pending at 155k while listed at 150k. Appraisal came back at 150k so we'll see what happens. 

    After my last post I still had a bunch of work that had to be done. I actually demolished the entire kitchen and bathroom floors and shower surround because the quality was so bad. I had to spend a lot of money fixing other mistakes as well from the previous contractor. The guy who I got to redo tile walked out halfway through the job so I had to find someone else to finish it up. Luckily I found a handyman who was competent and prepped it for for sale. 

    I had a contract with the buyer who I originally planned to sell to but that fell through because he was too demanding. He was using FHA loan and wanted me to sign an agreement stating whatever the FHA appraisal came back as would be the purchase price for the home. I've never heard of anything like that but there were too many ways that could screw me over. Of course I said no and he walked.

    I don't want to provide the MLS link in this forum until everything is complete. Anyone who's still interested in seeing the final product is welcome to private message me for it.

    I'll post financials as well once its complete.

    I'm halfway through my 3rd flip and a contract is pending for my 4th. Need to keep on moving and learn to be less involved as I try to complete multiple projects at the same time.

    2Reply
  • Gordon S.
    Real Estate Agent · Houston, TX · Member since 2015 · 55 posts · 22 votes
    9y

    Well. My opinions probably don't count that much seeing that I'm still far away from my FOURTH flip...but I wouldn't be embarrassed about anything. You have a standard that you keep by and there is nothing wrong with that. I had that same standard when it came to my 2 new builds and I had them replace all the tile in the second one because the job was of low quality, no embarrassment what so ever. It's not like you not paying a lot of money for this...

    That FHA buyer clearly is smoking something....that I might need to smoke as well each now and again! :-)

    1Reply
  • Ariel Salvaro
    Lender · Charlottesville, VA · Member since 2017 · 37 posts · 11 votes
    9y

    Hi Mark, thanks for documenting your journey - the good, the bad, and the ugly. I will PM you to stay in touch, as I definitely want to see the final outcome!

    0Reply
  • Scott Wiliamson
    Investor · San Antonio, TX · Member since 2017 · 7 posts · 0 votes
    9y

    I fully agree with @Ariel Salvaro and @Gordon S. and I'm sure with the countless other followers. I am currently building my education in the RE world and it's people like you that have a dramatic effect on ppl like myself just starting out. Please don't be embarrassed or anything of the sort to be learning as you go (your more prepared than I would have been). You had the courage to start; to act while others just analyze. I have picked up great nuggets of information from your posts. Thank you!!!! Please keep posting as I look forward to reading the inevitable good outcome.

    0Reply
  • James Barnes
    Rental Property Investor · Mechanicsville, MD · Member since 2015 · 123 posts · 62 votes
    7y

    @Mark Parzych I'm sure I'm resurrecting an old thread lol. But this thread and blog is priceless. Thanks for documenting your Journey!

    0Reply
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